Palo Alto city officials kept the public in the dark while secretly dealing with a prominent developer over two important land use issues and stonewalled residents’ requests for records that could shed light, the Santa Clara County Civil Grand Jury found in a report released Thursday.

Both land use issues involved philanthropist and developer John Arrillaga, although Grand Jury Foreman Bob Johnson said there was no evidence the city gave him special treatment.

The investigation was based on citizens’ complaints about the two cases, so the jury didn’t explore whether the city’s actions reflected a larger pattern.

“I don’t know if they’re preferential to him or not,” Johnson told The Daily News. “(And) I wouldn’t call it the tip of an iceberg, because I don’t know that. I do know that in these two cases, that’s what we found.”

According to the grand jury report, city officials waited nine months before telling the public that Arrillaga informed them in September 2011 he intended to develop a mixed-use project at 27 University Ave.

“On September 27, 2011, the City Manager emailed the entire City Council informing them that the developer would probably be contacting each of them to set up meetings to explain his proposal to them,” the grand jury wrote. “What followed were numerous meetings between members of the City Council, City staff, and representatives of the developer regarding his proposal. There were no notices of these meetings.”

Arrillaga’s plan to build four office towers and a theater in the middle of downtown was first publicly discussed at a March 5, 2012, meeting, when the council authorized spending $250,000 to develop ideas for bike, pedestrian and transit-related improvements and do environmental studies in the downtown area, including 27 University Ave., according to the grand jury report.

When public opposition to the project subsequently kicked in, residents complained that the city stonewalled their requests for public records related to the development.

The grand jury’s investigation into public records request logs and its own experience in seeking documents revealed that the city does a poor job tracking such requests and does not “consistently respond to requests for public records in a timely manner.”

Public outcry ultimately pushed the 27 University Ave. project onto a shelf in December 2013.

Noting that the city also invested public funds for a study linked to 27 University Ave. even before the project was officially filed, the grand jury “questioned the wisdom” of that expenditure.

Although the city has 90 days to craft a formal response to the grand jury’s report, City Manager James Keene wrote an email to The Daily News saying there was “nothing surprising or new in the report.”

“We have already acknowledged that the public process around 27 University could have been better, and we have been clear about that,” he wrote.

Regarding the city’s response to public records requests, Keene wrote that the city “receives many requests for information every single day and we do a really good job of responding to the public.”

Handling records requests is a challenge because they come through different departments, so the city added a public records request page on its website and is looking into getting software to help manage the requests, he wrote.

The grand jury also found fault with the way the city handled a 7.7-acre gift of open space granted to it by the family of Russell V. Lee in 1981. The land was not used by the city for years, and then in 1996 records show it began leasing the property to Arrillaga — who also owned adjoining land — at a rate of $1,100 per year. The developer used the land “for construction staging, even though the property was required to be used for conservation, including parks and recreation,” the grand jury report stated.

Arrilaga eventually offered to buy the parcel in the fall of 2012 for $175,000. Although city officials told the grand jury his bid was unexpected and unsolicited, the investigation revealed that they had commissioned their own appraisal of the property earlier that year that came up with a value of $175,000, “exactly the same amount the landowner offered to pay.”

By meeting in closed session to discuss the offer, the council violated its own policies and procedures, which call for a public process for the disposal of surplus land that includes competitive bidding.

“Ultimately, during the course of this Grand Jury’s inquiry into the matter, the City Council took action to annex the parcel to the adjacent Foothills Park in spring 2014,” the report stated.

In his response, Keene said issues related to the “Lee Gift Deed” go back 30 years and the city can only be held accountable for “contemporary decisions on this land today,” which include the council’s recent direction to dedicate the 7.7 acres as parkland.

Problems with transparency in government can erode public confidence, Johnson said.

“It would be my hope that this would generate interest in the community to better scrutinize what their local officials are doing,” Johnson said.

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